alec.

org

the

STATE

N O V E M B E R 2014

FACTOR
A PUBLIC AT ION OF T H E AM ER IC AN LEG ISLAT IVE EXC H ANG E COUNCIL

States Are Engaging EPA on Clean Power Plan

By Rep. Thomas Lockhart, WY (HD-57), Rep. Bette Grande, ND (HD-41) and Rep. Chuck Martin, GA (HD-49)

Background

North Dakota, for example, would be required to reduce carbon

dioxide emissions by what may appear to be a fairly modest 11

n June 2, 2014, the U.S. Environmental Protection Agency

percent, while Washington State would be responsible for a 72

(EPA) made headlines by proposing a rule the agency calls

percent reduction.

the Clean Power Plan. This incredibly far-reaching regulation

seeks to reduce carbon dioxide emissions from existing fossil fuel-fired power plants by 30 percent from 2005 levels.

The Role of EPA

When President Richard Nixon and Congress came together to

As a part of the proposal, EPA has assigned each of the 49

establish the EPA in 1970, they did so with a deliberate vision

states with fossil fuel-fired power plants a different carbon dioxide emissions limit that must be implemented by 2020 and
achieved by 2030. These emissions limits vary by state and are
based upon each states existing electric generating mix and
an EPA assessment of each states ability to implement four
emissions reduction measures referred to as building blocks.
These so-called building blocks include the following measures:
(1) improving thermal efficiency of existing coal-fired units by
6 percent, (2) increasing the capacity factor of existing natural
gas combined-cycle plants to 70 percent, (3) installing new renewable generation capacity, perhaps even via a state-based
renewable portfolio standard (RPS) program and (4) increasing
end-use (or consumer) energy efficiency that would reduce
electricity use by 12 percent.

To learn more about how the American

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T H E S TAT E FA C T O R

over time. Many examples of EPAs departure from this model

are outlined in The U.S. Environmental Protection Agencys Assault on State Sovereignty, released by the American Legislative
Exchange Council (ALEC) in 2013.

How the Proposed Regulation Will

Affect States
EPA has historically interpreted its authority under the Clean
Air Act as only being able to regulate emissions directly at af-

EPA predicts that almost 50 gigawatts

of installed coal-fired generating
capacity will be retired between 2016
and 2020 as a direct result of the
Clean Power Plan.

fected power plant units. With the proposed Clean Power Plan,
however, it has become apparent that EPA now intends to go
beyond the fence-line of the power plant by transforming the
way states have carefully developed their electric generation
mixes to support their economies. Instead of merely setting
carbon dioxide emissions limits for electricity generating units,
the proposed rule (as explained earlier) sets individual state
emissions rate goals and suggests building blocks for achieving
those goals. Only the first building blockimproving thermal
efficiency of existing coal-fired units by six percentcomes

for how national environmental policy should be implemented.

within the fence-line of the power plant.

Based upon a vision of cooperative federalism, EPA would work

closely with the states to balance economic growth with envi-

EPA itself is expecting a widespread curtailment of operations

ronmental protection.1

as a result of its Clean Power Plan. Using its Integrated Planning Modeling (IPM), EPA predicts that almost 50 gigawatts of

Indeed, the preamble of the federal Clean Air Act clearly re-

installed coal-fired generating capacity will be retired between

flects this cooperative federalist framework when it states that

2016 and 2020 as a direct result of the Plan. Legislators and

air pollution preventionand air pollution control at its source

other state policymakers can quickly determine which plants

is the primary responsibility of States and local government,

within their borders are expected to shut down from EPAs list

and that federal financial assistance and leadership is essen-

of state-by-state plant closures.3 These closures will inevitably

tial for the development of cooperative Federal, State, regional

lead to job losses and losses in tax revenues, especially in rural

and local programs to prevent and control air pollution.2

communities. EPA has also acknowledged that an additional 71

gigawatts of installed capacity is slated for retirement between

Such an arrangement as outlined in the Clean Air Act makes

2010 and 2020 as a result of other environmental regulations.

logical sense. States have unique circumstances and conditions

This total capacity of just over 120 gigawatts slated for retire-

that policymakers need to consider when implementing any

ment by 2020 represents roughly 33 percent of the coal-fired

sort of policy measure, especially those pertaining to environ-

generation in the U.S. and provides enough electricity to power

mental protections. At the same time, however, the federal

60 million homes.

government has a responsibility to provide technical assistance

and financial resources necessary for implementing meaning-

Since EPAs estimates of its own regulatory impacts are typically

ful environmental regulations.

on the conservative side, can we trust its prediction that only

modest increases in electricity prices will result from its Clean

Unfortunately, much to the detriment of states and individuals,

Power Plan? Not when we compare 2013 electricity prices in

this cooperative federalist approach has slowly deteriorated

Wyoming (7.55 cents/kWh), North Dakota (8.19 cents/kWh)

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and Georgia (9.53 cents/kWh) to the prices of electricity in

risey (WV), the states of Alabama, Indiana, Kansas, Kentucky,

states with self-imposed carbon dioxide emissions limits, which

Louisiana, Nebraska, Ohio, Oklahoma, South Dakota, South

range from 10.98 to 15.68 cents per kilowatt hour.

Carolina, West Virginia and Wyoming filed a motion to expe-

dite the court review of the lawsuit, noting that doing so will
Not only will citizens directly pay for increased electricity costs

reduce irreparable harm to the states and to the public given

in their homes, but the cost of goods and services will also in-

the gravity of the situation.6

crease. According to a study conducted by the American Enterprise Institute for Public Policy Research (AEI), nearly half (46
percent) of what individual Americans pay for energy comes
embodied in the costs of goods and services. Increased electricity prices also affect citizens differently. Lower and middle
income families continue to struggle to make ends meet and
would be required to spend an even greater amount of their
income on electricity. Food prices in particular would also increase, since about 40 percent of the energy required to grow
crops and raise livestock comes in the form of electricity.5
Most states will not be able to reduce their carbon dioxide
emissions rates with these measures, because doing so will be
cost prohibitive. Furthermore, EPAs building blocks are unrealistic and may be impossible to achieve and cannot be implemented in the 12 to 24 months between EPAs final approval
of the rule and the deadline for submitting a state implementation plan (SIP). When states inevitably fail to achieve one or

Before EPA published its proposal in early June, ALEC, as well as

more of the four building blocks, states will be forced to retire

many legislatures, attorneys general and financial and environ-

even more coal-fired generation in order to comply with the

mental regulators, passed resolutions and sent letters to EPA

regulation.

expressing their views on how carbon dioxide emissions could

be reduced at affected power plant units via supplemental vol-

Since the New Deal, the regulation of retail electricity sales

untary measures. On paper, it may appear that EPA incorporat-

and local distribution has been a sovereign state function. In

ed these recommendations, but in reality they did not. Now is

proposing the Clean Power Plan, EPA is intruding into the sov-

the time for states to fight for their sovereign authority and to

ereign authority of states without any clear congressional au-

protect their citizens and economies from this unreasonable

thorization.

EPA mandate.

States are Taking Action

EPA should withdraw the proposed rule and issue new guide-

Many policymakers are rightfully concerned about the effects

adequate, reliable, affordable electrical generating fleet, (3)

of this new regulation, especially those in states with heavy

are based on EPA guidelines for cost-effective, achievable re-

manufacturing- and agriculture-based economies that rely on

ductions at the affected power plant units, rather than states,

continuous 24/7 baseload generation.

(4) establish emissions guidelines based on adequately demon-

lines that (1) respect the primacy of states, (2) maintain an

strated systems that are fuel and technology specific, (5) proAlready, many state attorneys general have questioned the le-

vide credit for significant emissions reductions already made

gality of EPAs proposal by filing a lawsuit against the agency.

or being made, (6) avoid premature retirements and stranded

On September 3, 2014, led by Attorney General Patrick Mor-

assets and (7) be fair and equitable to all electricity customers.

THE STATE FACTOR 3

T H E S TAT E FA C T O R

Electricity Price by State, 2013

States with self-imposed carbon limits* have
higher electricity prices than states that dont
Rank
1

State

Primary Source

Washington

Hydroelectric

Nominal Price
(Cents per kWh)

Inflation Adjusted 1
Year Change
7.06

+<0.1%

Inflation Adjusted
5 Year Change
0.50%

Kentucky

Coal

7.54

3.20%

12.70%

Wyoming

Coal

7.55

3.80%

25.90%

Idaho

Hydroelectric

7.61

10.10%

23.50%

Oklahoma

Natural Gas

7.81

3.60%

-7.00%

Arkansas

Coal

7.82

2.10%

-2.10%

West Virginia

Coal

7.91

-4.10%

32.20%

Illinois

Nuclear

7.99

-6.70%

-19.90%

Louisiana

Natural Gas

14.40%

-19.30%

10

Iowa

Coal

8.12

3.30%

8.90%

11

Utah

Coal

8.18

2.80%

17.70%

12

North Dakota

Coal

8.19

3.70%

14.10%

13

Oregon

Hydroelectric

8.39

0.30%

7.20%

14

Montana

Coal

8.58

2.90%

4.30%

15

Indiana

Coal

8.63

4.10%

13.80%

16

Nebraska

Coal

8.69

5.20%

22.10%

17

Texas

Natural Gas

8.77

0.60%

-24.40%

18

South Dakota

Hydroelectric

8.84

2.20%

14.40%

19

Missouri

Coal

8.96

4.30%

21.20%

20

Virginia

Nuclear

9.01

-2.20%

4.70%

21

Alabama

Coal

9.02

-3.10%

-0.20%

22

Nevada

Natural Gas

9.04

-0.30%

-13.90%

23

South Carolina

Nuclear

9.14

-0.60%

7.50%

24

Mississippi

Natural Gas

9.16

5.40%

-3.50%

25

Ohio

Coal

9.16

-0.30%

1.80%

26

North Carolina

Coal

9.18

-0.50%

6.50%

27

Tennessee

Coal

9.22

-2.30%

4.90%

28

New Mexico

Coal

9.24

2.70%

4.80%

4 AMERICAN LEGISLATIVE EXCHANGE COUNCIL

S TAT E S A R E E N GA G I N G E PA O N C L E A N P OW E R P L A N

Rank

State

Primary Source

29

Minnesota

Coal

Nominal Price
(Cents per kWh)

Inflation Adjusted 1
Year Change

9.52

6.20%

Inflation Adjusted 5
Year Change
13.90%

30

Georgia

Natural Gas

9.53

0.90%

-0.30%

31

Kansas

Coal

9.57

2.80%

19.50%

32

Colorado

Coal

9.8

3.20%

6.50%

33

Pennsylvania

Coal

9.83

-2.10%

-1.50%

United States
Average

Coal

10.08

0.90%

-3.50%

34

Arizona

Coal

10.16

2.40%

3.00%

35

Florida

Natural Gas

10.3

-2.90%

-11.30%

36

Wisconsin

Coal

10.63

1.30%

10.10%

37

Delaware

Natural Gas

10.98

-2.70%

-17.10%

38

Michigan

Coal

11.26

1.20%

17.20%

39

Maryland

Coal

11.65

1.30%

-17.10%

District of
Columbia

Natural Gas

11.85

-1.30%

-16.40%

Maine

Natural Gas

11.87

-1.10%

-20.70%

40
41

New Jersey

Nuclear

13.7

-2.70%

-11.90%

42

Rhode Island

Natural Gas

13.91

6.60%

-19.70%

43

New Hampshire

Nuclear

14.31

-0.90%

-9.70%

44

Vermont

Nuclear

14.45

-0.20%

8.30%

45

Massachusetts

Natural Gas

14.51

4.00%

-17.60%

46

California

Natural Gas

14.57

4.80%

8.80%

47

New York

Natural Gas

15.62

1.70%

-12.90%

48

Connecticut

Nuclear

15.68

-0.40%

-18.50%

49

Alaska

Natural Gas

16.51

0.60%

4.80%

50

Hawaii

Petroleum

33.27

-3.50%

7.30%

*California and New England states in RGGI have self-imposed carbon limits
Source: Nominal electricity prices by state and economic sector are based on aggregated data from individual electric utilities
derived from United States Form EIA-861 and Form EIA-826. To control for the changing value of the United States Dollar,
nominal prices were converted to Real 2010 US$ using the Bureau of Labor Statistics (BLS) Consumer Price Index (CPI).

THE STATE FACTOR 5

T H E S TAT E FA C T O R

Energy Inputs Consumed

on U.S. Farms (2001-2011)
Trillion Btu of energy
900
800
700
600

Fuel

500
400
300

Electricity

200
100
0

2001

02

03

04

05

06

07

Other direct
08
09
10

11

Electricity accounts for approximately 40 percent of all energy use on U.S.

farms. When electricity costs increase, families will pay more for food.
Source: Miranowski (2005) and USDA, Economic Research Service calculation in Beckman, Borchers, Jones (2013) USDA Bulletin 112.

6 AMERICAN LEGISLATIVE EXCHANGE COUNCIL

S TAT E S A R E E N GA G I N G E PA O N C L E A N P OW E R P L A N

Proposed EPA
111(d) Regulatory Timeline
Enforceable Compliance
Program Begins

Rule Proposed

Final Rule Issued

CO2 Emission Rate
Reduction Requirements
Gradually Become
More Stringent

1 Year for
Approval
Extension
for 1 State
SIPs*

1 Year for
Approval

1 Year for
Approval

2014

2015

2016

2017

2018

2019

2020

2030

*SIP: State Implementaion Plan

Source: Carbon Polluting Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units, A proposed rule
by the Environmental Protection Agency, June 18, 2014, https://www.federalregister.gov/articles/2014/06/18/2014-13726/carbon-pollution-emission-guidelines-for-existing-stationary-sources-electric-utility-generating.

THE STATE FACTOR 7

T H E S TAT E FA C T O R

32 States Oppose EPAs Carbon

Proposal for Power Plants
MT
ID
WY

ND
WI

SD

MI

NE
IL

UT
KS
AZ

TX

AK

WV

VA
NC

TN

AR
LA

OH

IN
KY

MO

OK

NM

PA

SC
MS

AL

GA

FL

States in which elected officials (e.g.,

legislatures, governors and/or attorneys
general) have expressed firm opposition
to EPAs proposed Clean Power Plan.

8 AMERICAN LEGISLATIVE EXCHANGE COUNCIL

S TAT E S A R E E N GA G I N G E PA O N C L E A N P OW E R P L A N

ALEC Resources

End Notes

ALEC is a public-private partnership of state legislators from

1 William Yeatman, The U.S. Environmental Protection Agencys

Assault on State Sovereignty, Arlington, VA: American Legislative
Exchange Council, 2013, page 1.

across the country, members of the private sector and the general public that exists to advance principles of limited government, free markets and federalism at the state level.

2 42 U.S. Code 7401 Congressional findings and declaration of

purpose.

At the 2014 ALEC Annual Meeting in Dallas, the Task Force on

3 Clean Power Plan Facts Expected Plant Retirements, American

Legislative Exchange Council, http://www.alec.org/cpp-facts/expected-plant-retirements/.

Energy, Environment and Agriculture passed the model Resolution Concerning EPAs Proposed Guidelines for Existing Fossil
Fuel-Fired Power Plants. The resolution calls upon state legislators and other state policymakers to raise any concerns they
may have about the proposed rule, including concerns about
the legal, economic, employment, timing, achievability, affordability, implementation scheduling and reliability issues that
arise from the Plan by the December 1 deadline.
This latest resolution follows similar ALEC adopted models,
such as the Resolution Concerning EPA Proposed Greenhouse
Gas Emission Standards for New and Existing Fossil-Fueled
Power Plants and the Resolution in Response to EPAs Plan to
Regulate Greenhouse Gases Under the Clean Air Act. ALEC

4 Southern States Regional Energy Profiles, Southern States

Energy Board, 2014, http://www.sseb.org/wp-content/uploads/2014/07/2014-Southern-States-Energy-Profiles_FINAL.pdf,
page 59.
5 Jayson Beckman, Allison Borchers, and Carol A. Jones, Agricultures
Supply and Demand for Energy and Energy Products, United States
Department of Agriculture Economic Research Service, http://
www.ers.usda.gov/media/1104145/eib112.pdf, page 10.
6 Petitioners Motion to Set a Consolidated Briefing Schedule and
to Expedite Consideration, State of West Virginia, et al. v. United
States Environmental Protection Agency, http://www.ago.wv.gov/
pressroom/Documents/Motion%20to%20expedite%20-%20File%20
Stamped.pdf.

maintains policy supporting fuel diversity and energy efficiency

measures but holds the position that carbon dioxide emissions
should not prevent states and electric utilities from providing
affordable, reliable and safe electricity while the environment
is being protected.

THE STATE FACTOR 9

A P UBLICATIO N OF T HE AMERICA N LEGIS LAT IVE EXC H ANG E COUNC IL

the

STATE

FACTOR

2900 Crystal Drive, Suite 600

Arlington, VA 22202
www.alec.org

To learn more about how the American

Legislative Exchange Council helps develop
innovative solutions in partnership with
lawmakers and business leaders, or to become a
member, please visit www.alec.org.
American Legislative Exchange Council
2900 Crystal Drive, Suite 600
Arlington, VA 22202
Tel: 703.373.0933
Fax: 703.373.0927
www.alec.org